Trump and EU Reach Tariff Deal, Avoiding Trade War

The EU is America's biggest regional trading partner and its top source of foreign investment

- Kim Mackrael & Natalie Andrews

President Trump said he reached a trade agreement on Sunday with the European Union, avoiding a damaging trade war with the U.S.'s largest trading partner and marking his biggest deal so far in his attempt to remake the global trading system through higher tariffs for U.S. trading partners.

Trump said the U.S. would set a baseline tariff of 15% for European goods, including automobiles. He said the EU had agreed as part of the deal to buy $750 billion of energy products from the U.S. and invest an additional $600 billion in the U.S.

"I think it's going to be great for both parties," Trump said, following face-to-face talks Sunday with European Commission President Ursula von der Leyen in Trump's golf resort in Turnberry, Scotland.

The European deal is the most consequential agreement Trump has so far announced. The EU is America's biggest regional trading partner when the bloc's 27 member states—which share a common trade policy—are considered together and its top source of foreign investment. The two sides exchange more than $5 billion worth of goods and services every day.

"Today's deal creates certainty in uncertain times," von der Leyen said. She said the 15% level would apply for "the vast majority of EU exports" including cars, semiconductors and pharmaceuticals. The 15% level "is the best we could get," she said.

The terms disclosed on Sunday suggest that 15% is likely a new minimum tariff level for most American trading partners. Economists and trade analysts say tariffs at that level will have an effect on companies' decisions and are expected to contribute to higher prices for Americans, but won't stop global trade flows.

"They are not at the level where the global economy burns down," said Dmitry Grozoubinski, senior trade adviser at Aurora Macro Strategies.